Masters Of War

Come you masters of war You that build all the guns You that build the death planes You that build all the bombs You that hide behind walls You that hide behind desks I just want you to know I can see through your masks. You that never done nothin' But build to destroy You play with my world Like it's your little toy You put a gun in my hand And you hide from my eyes And you turn and run farther When the fast bullets fly. Like Judas of old You lie and deceive A world war can be won You want me to believe But I see through your eyes And I see through your brain Like I see through the water That runs down my drain. You fasten all the triggers For the others to fire Then you set back and watch When the death count gets higher You hide in your mansion' As young people's blood Flows out of their bodies And is buried in the mud. You've thrown the worst fear That can ever be hurled Fear to bring children Into the world For threatening my baby Unborn and unnamed You ain't worth the blood That runs in your veins. How much do I know To talk out of turn You might say that I'm young You might say I'm unlearned But there's one thing I know Though I'm younger than you That even Jesus would never Forgive what you do. Let me ask you one question Is your money that good Will it buy you forgiveness Do you think that it could I think you will find When your death takes its toll All the money you made Will never buy back your soul. And I hope that you die And your death'll come soon I will follow your casket In the pale afternoon And I'll watch while you're lowered Down to your deathbed And I'll stand over your grave 'Til I'm sure that you're dead.------- Bob Dylan 1963

Sunday, July 23, 2017

oil prices down on rising OPEC output; another drop in US oil, gasoline supplies; backlog of unfracked wells at record high

this week's US oil data from the US Energy Information Administration, covering details for the week ending July 14th, showed an increase in US oil imports, a decrease in our oil exports, and a decrease the amount of oil used by US refineries, which nonetheless still left us short of oil for the week, which thus meant another withdrawal from our commercial stocks of crude oil...our imports of crude oil rose by an average of 386,000 barrels per day to an average of 7,996,000 barrels per day during the week, while at the same time our exports of crude oil fell by 190,000 barrels per day to an average of 728,000 barrels per day, which meant that our effective imports netted out to 7,268,000 barrels per day during the week, 576,000 barrels per day more than during the prior week...at the same time, our field production of crude oil rose by 32,000 barrels per day to an average of 9,429,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 16,797,000 barrels per day during the cited week...

during the same week, refineries reportedly used 17,119,000 barrels of crude per day, 125,000 barrels per day less than they used during the prior week, while at the same time 676,000 barrels of oil per day were being pulled out of oil storage facilities in the US....thus, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 254,000 more barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (-254,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,841,000 barrels per day, which was 1.7% below the imports of the same four-week period last year...the 676,000 barrel per day decrease in our total crude inventories shows up as a 675,000 barrel per day withdrawal from our commercial stocks of crude oil while oil stored in our Strategic Petroleum Reserve was unchanged, so there's some weird rounding in one or both of those metrics....this week's 32,000 barrel per day increase in our crude oil production resulted from a 30,000 barrel per day increase in oil output from wells in the lower 48 states and a 2,000 barrels per day increase in oil output from Alaska...the 9,429,000 barrels of crude per day that were produced by US wells during the week ending July 14th was 7.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up by 11.0% from our 8,494,000 barrel per day of oil output during the during the same week a year ago, while it was still 1.9% below the June 5th 2015 record US oil production of 9,610,000 barrels per day...

with the slowdown in refining, gasoline production from our refineries decreased by 373,000 barrels per day to 10,096,000 barrels per day during the week ending June 14th, which was still fractionally higher than the 10,050,000 barrels of gasoline that were being produced daily during the comparable week a year ago....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 404,000 barrels per day from last week's all time high to 4,945,000 barrels per day, which was also down by 1.2% from the 5,004,000 barrels per day of distillates that were being produced during the week ending July 15th last year.....

finally, with the increase in oil imports, and the relatively slower refining, our commercial supplies of crude oil decreased for the 13th time in the past 15 weeks, as our commercial oil inventories fell by 4,727,000 barrels to 490,623,000 barrels as of July 14th, leaving us with the least oil in storage since the end of January.. however, we still finished the week with 2.4% more crude oil in storage than the 479,012,000 barrels we had stored at the end of last year, and a small fraction more crude oil in storage than the 488,830,000 barrels of oil in storage on July 15th of 2016....compared to historical figures, when the oil glut was still building, this week still saw 13.6% more crude than the 431,836,000 barrels in of oil that were in storage on July 17th of 2015, 44.6% more crude than the 339,328,000 barrels of oil we had in storage on July 18th of 2014, and 45.7% more than the 10 year average of oil supplies for this time of year ...

This Week's Rig Count

US drilling activity stalled for the 3rd time in 4 weeks during the week ending July 21st, following 23 consecutive weeks of increases....Baker Hughes reported that the total count of active rotary rigs running in the US fell by 2 rigs to 950 rigs in the week ending Friday, which was still 488 more rigs than the 462 rigs that were deployed as of the July 22nd report in 2016, even though it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil decreased by 1 rig to 764 rigs this week, which was still up by 393 oil rigs over the past year, while it was still far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations also decreased by 1 rig to 186 rigs this week, which was still 98 more rigs than the 88 natural gas rigs that were drilling a year ago, but way down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008...

however, new drilling started from 2 platforms in the Gulf of Mexico offshore of Louisiana this week, which brought the Gulf of Mexico activity count up to 23 rigs, up from 18 rigs in the Gulf and a total of 19 offshore a year ago, when there was also a rig deployed offshore of Alaska, in the Cook Inlet...

the count of active horizontal drilling rigs decreased by one rig to 803 rigs this week, the first drop in horizontal drilling since November 11th of 2016...however, active horizontal rigs were still up by 446 rigs from the 357 horizontal rigs that were in use in the US on July 22nd of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....meanwhile, the vertical rig count was down by 4 rigs to 72 vertical rigs this week, which was still up from the 61 vertical rigs that were deployed during the same week last year....on the other hand, the directional rig count was up by 3 rigs to 75 directional rigs this week, which was also up from the 44 directional rigs that were deployed during the same week last year...

as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of July 21st, the second column shows the change in the number of working rigs between last week's count (July 14th) and this week's (July 21st) count, the third column shows last week's July 14th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 22nd of July, 2016...

clearly, there's a lot of minus signs on this week's table, something we haven't seen much of this past year...the two most active states, Texas and Oklahoma, were down 3 rigs each, with decreases in the Barnett near Dallas-Ft Worth and the Eagle Ford of south Texas contributing to the Texas drop, while Oklahoma dropped rigs in the Arkoma Woodford and the Mississippian...meanwhile, Louisiana added 4 rigs, with additions in the Gulf of Mexico and the Haynesville...once again, the number of drilling rigs working in the Utica and the Marcellus were unchanged, and hence there was also no change in drilling activity in Ohio, Pennsylvania, or West Virginia...natural gas rigs ended up down one despite the addition of two in the Haynesville, however, as one natural gas rig was pulled from the Arkoma Woodford and two were removed from other basins not individually itemized by Baker Hughes...of the states not included on the above list of major producers, Alabama got rid of one rig and Illinois got rid of two; that left Alabama with two rigs, still up from just 1 rig throughout last July, and left Illinois with one rig, down from the 3 that were running in the state last July 22nd...meanwhile, Kentucky saw two rigs start up in the the state's first drilling since June 2nd, also an increase from a year ago, when there were no rigs active in the state...

DUC well report for June

this past week also saw the release of the EIA's Drilling Productivity Report for July, which includes the EIA's June data for drilled but uncompleted oil and gas wells in the 7 most productive US shale basins...once again, this report showed a large increase in uncompleted wells nationally, entirely because of dozens of newly drilled but uncompleted wells (DUCs) in the two Texas oil basins, the Permian basin of west Texas and the Eagle Ford in the south.... for all 7 sedimentary basins covered by this report, the total count of DUC wells rose from 5,877 wells in May to 6031 wells in June, the eighth consecutive monthly increase in uncompleted wells, and the highest number of such unfracked wells in the short history of this report....as we know from the weekly rig counts, horizontal drilling has rapidly expanded over the past year, more than doubling over that period, and as a result a shortage of competent fracking crews has developed, such that existing fracking crews are unable to keep up with the number of newly drilled wells...yet another article this week tells us that skilled worker shortages are hampering fracking operations, noting 200 frack crew job openings listed for North Dakota alone...over the 2 and a half year oil field slump and associated layoffs that began in early 2015, most frackers had gone nearly two years with just skeleton fracking crews still working in most basins around of the country, and as a result many of those who had had been working in the oil fields before the bust had since found work elsewhere, and have no interest in returning to boom/bust oil work...furthermore, fracking crew retirements were up 33 percent last year, & intelligent young people dont want to work in an oilfield any more than they want any kind of dirty, manual labor job... fracking has also become more complex and technically demanding over that period, with 50 stage fracks explosively driving several hundred pounds of proppant per foot of lateral not uncommon, so putting together a fracking crew capable of correctly & accurately executing the current fracking techniques has become that much more difficult...

a total of 1,026 new wells were drilled in the 7 basins covered by this report during June, but only 872 drilled wells were completed, thus accounting for the 154 DUC well increase for the month....as has been the case all year, the June DUC increases were oil wells, with most of those in the Permian basin...the Permian saw its total count of uncompleted wells rise by 130, from 2,114 DUC wells in May to 2,244 DUCs in June, as 475 new wells were drilled into the Permian but only 345 wells in the region were fracked...at the same time, DUC wells in the Eagle Ford of south Texas rose by 42, from 1,364 DUC wells in May to 1,406 DUCs in June, as 187 wells were drilled in the Eagle Ford in June but only 145 drilled wells were completed....in addition, DUC wells in the Bakken of North Dakota increased by 8 to 819, as 92 wells were drilled but just 84 Bakken wells were fracked, while the Niobrara chalk of the Rockies front range saw their uncompleted well inventory increase by 2 wells to 663, as 142 wells were drilled into the Niobrara, while 140 wells were fracked during the same period....on the other hand, the Marcellus DUC count fell by 20 wells, from 663 DUCs in May to 643 DUCs in June, as 60 Marcellus wells were drilled while 80 were fracked...likewise, Ohio's Utica shale showed a decrease of 11 uncompleted wells and thus had only 62 uncompleted wells remaining at the end of June, as 23 new wells were drilled into the Utica during the month while 34 Utica wells were completed...meanwhile, the Haynesville shale of Louisiana was the only natural gas basin to see a DUC well decrease, as their uncompleted well inventory rose by 3 wells to 194, as 47 wells were drilled into the Haynesville, while 44 wells were fracked in the same region...for the month, DUCs in the 4 oil basins tracked by in this report (ie the Bakken, Niobrara, Permian, and Eagle Ford) increased by 182 wells to 5,132 wells, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) decreased by 28 wells to 899 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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